High and volatile food prices and economic recession continue to undermine the food security of the poor in many emerging market economies. Some of the causes of the food price crisis are national and local, while some are global in nature, requiring coordinated global action, most importantly in the areas of: sound trade policy with risk mitigation elements, emergency relief and public investment in agricultural innovation.
In response to food price spikes, poor households reduce the quantity and quality of their diets and cut back on spending for goods and services essential for their wellbeing. And the burden on the most vulnerable is increasing as incomes shrink, jobs are lost, remittances decline and credit dwindles. In developing countries, the number of hungry people is projected to increase from 848 million in 2003–05 to 1,020 million in 2009.
The food crisis has also revealed the much increased global challenge of feeding the world’s growing population. To overcome existing hunger, feed an additional 2 billion people by 2050 and accommodate rising demand from income growth, food production will have to increase significantly in the future, and to achieve that, incentives and public policies must be appropriate to foster investment and facilitate social protection of the poor.
The food crisis is not over for the poor in many low-income economies, where prices remain high and agricultural production response is slow. While international food prices may have fallen from their peaks, mainly due to the financial crunch and recession, they are not as low as in the early 2000s, and many of the driving forces of the food crisis, as well as increased stockpiling, hoarding and speculation in agricultural commodity markets, continue to put upward pressure on food prices and increase volatility.
At the domestic level, prices remain distressingly high and volatile in many countries, for example, in Ethiopia, Kenya and Uganda, maize prices in June 2009 were double their levels two years ago; in Burkina Faso and Niger, rice prices were 50% higher. As a result of the recession, capital for agriculture shrunk, thus hindering acceleration of production growth; in 2008, cereal output in developing countries grew by less than 1%, and it is projected to remain unchanged this year.
Pre-programmed for the next food crisis
Looking forward, the growth and sustainability of food production will be further hampered by increasing land and water constraints: many water sources are almost used up, and supply needs to increase by at least one-third to support agriculture by 2030.
In the context of the food crisis, increased competition for land and water combined with distrust in global market functioning, have led to foreign land acquisitions overseas, and food-importing countries with land and water constraints but rich in capital, such as the Gulf States, are at the forefront of new investments in farmland abroad. In addition, countries with large populations and food security concerns such as China, South Korea and India are seeking opportunities to produce food in land-rich developing countries. This inflow of capital can in principle benefit pro-poor rural growth in developing countries.
However, an internationally accepted code of conduct and accompanying policies to guide land acquisitions are needed to ensure win-win outcomes both for domestic agriculture and for investors’ food security; transparency of these deals is needed, and customary land rights must be protected.
The challenges to food production are compounded by climate change: as climate change decreases agricultural productivity in developing countries, it will further exacerbate food insecurity, and the IFPRI (International Food Policy Research Unit) projects that global production of irrigated wheat, irrigated rice, rain-fed maize will be 42%, 17% and 16% lower respectively in 2050 due to climate change. Due to climate change too, global food prices and child malnutrition across all regions are also projected to be higher in 2050.
Climate change negotiations – leading up to the 2009 UN Framework Convention on Climate Change in Copenhagen and thereafter – need to incorporate agriculture effectively, and agriculture must be included through three avenues: investments related to agriculture; incentives to reduce emissions (mitigation) and support technological change (adaptation); and information and monitoring of land use and soils for verification of actions with impact. These actions must ensure that poor small farmers in developing countries are not further threatened by climate change policies, and that they could take part in the new economic opportunities that might arise from the negotiations. The small farmers’ families, who include the largest number of food-insecure people, cannot wait for long-term climate change policies: they need action at scale now.
The world may be pre-programmed for the next food crisis if the much-needed investments in agriculture are not forthcoming and long-term threats are not properly addressed. With the global economic crisis, gross domestic product growth has fallen significantly and optimistic projections have been scaled down. Low economic growth has negative second-round effects for agricultural investment and productivity, with severe implications for food prices and food security. Maize prices, for instance, will be 27% higher in 2020 according to IFPRI projections, and 16 million more children will be malnourished globally with recession and reduced investments in agriculture, compared to continued high economic growth and maintained investments.
Policy agenda for preventing a repeat food crisis
Sustainable and strategic solutions that encompass the entire world food system are needed to mitigate the emerging challenges and to build resiliency towards future food crises. Sound policy actions in three priority areas are called for:
Reduce extreme volatility in agricultural markets and facilitate open trade.
Two global collective actions are needed to reduce extreme volatility in agricultural markets and ensure food security. First, a small, independent physical reserve should be established exclusively for emergency response and humanitarian assistance. Second, a coordinated physical and a virtual reserve and intervention mechanism should be created as a risk mitigation tool to help avoid price spikes in the future. This would not be a general food price stabilization attempt, but just a price spike prevention tool to prevent the type of extreme spikes that lead to hunger and severely disrupt markets.
Facilitation of rule-based, transparent, fair and open international trade is also needed to overcome the crises, and the World Trade Organization (WTO) Doha Round should be successfully concluded. Failure of the Doha negotiations could result in a loss of more than $1 trillion in world trade, reduction of world welfare by $353 billion, and decrease of agricultural exports in developing countries by 11.5%. Failure to close the round in a meaningful way would also maintain the high risk for the poor from volatility prompted by trade restrictions.
Promote pro-poor agricultural growth with technology and institutional innovations
To enhance agricultural productivity, investments should be scaled up in the areas of agricultural science and technology, rural infrastructure, rural institutions and information monitoring and sharing. If public agricultural research is doubled and targeted at the poor regions of the world – Sub-Saharan Africa and South Asia – overall agricultural output growth would increase by 1.1 percentage points a year and lift about 282 million people out of poverty by 2020 through income and consumption effects. The world needs a much bigger “store” of knowledge to address the uncertain food situation in the future.
Innovations in institutions (laws and regulations as well as organizations) have crucial roles to play in boosting pro-poor agricultural growth. They are needed to strengthen markets for commodities produced, bought and sold by smallholders by reducing transaction costs, managing risk, building social capital, enabling collective action and restoring missing markets. Innovations in agricultural insurance are part of this.
Expand social protection and child nutrition action
To protect the basic nutrition of the most vulnerable and improve food security, agricultural growth and reducing market volatility must be accompanied by social protection and nutrition actions. Protective actions are needed to mitigate short-term risks, including conditional cash transfers, pension systems and employment programmes.
Preventive health and nutrition interventions are needed to avoid long-term negative consequences. Since good nutrition is crucial for children’s physical and cognitive development as well as for their productivity and earnings as adults, early childhood nutrition actions and school feeding programmes should be strengthened and expanded to ensure universal coverage.
A strategy for risk prevention, risk mitigation and risk management is needed to address the food-crisis, requiring strong international leadership and collective action at a global scale to formulate and implement all these actions effectively. To allow for effective decision-making, higher investments in information and monitoring are required.
To implement policies successfully and forestall future food crises, it is vital that policy and governance practices are strengthened, both in the international food system and at national level in many developing countries.
Joachim Von Braun is director-general of the International Food Policy Research Institute (IFPRI)